AGCS hit by cat losses and soft market but delivers robust results

“The exceptional year was 2009, largely due to the economic downturn which lowered our exposures because of reduced economic activity,” Mr Theis told Commercial Risk Europe. “However, coming out of 2009, market conditions still remained soft in terms of pricing.” In 2010, AGCS was impacted by larger than expected natural catastrophe losses, in particular the Chilean earthquake that saw losses totalling €65m, of which €60m alone came from a single destroyed highway, Mr Theis said. Other catastrophe events that impacted AGCS’s results were the spring windstorms in Europe, and, in Australia, the winter hailstorm and late-year floods. hideAGCS’ operating profit declined by 21% to €461m, from €590m the year before, according to financial figures released last week. AGCS had a combined ratio of 93.7% in 2010, compared to 87.3% in 2009. But the comparison with 2009 should be seen in perspective to the one-off profits and a benign natural catastrophe season in 2009, an analyst pointed out. On the positive side, AGCS’s gross written premium volumes increased by more than 5% to €4bn, from €3.8bn in 2009, primarily due to the integration of new portfolios in various markets, as well as new client business. Mr Theis also highlighted the continued optimisation of AGCS’ portfolio and technical effects, such as foreign exchange and reserve take-downs. Only in specific financial lines did AGCS see rates increase. Aviation and engineering remained flat, while all other lines continued their soft trend, he said. “In all, AGCS remained highly profitable with a combined ratio that met expectations,” Mr Theis added. Ralf Bender, an insurance analyst with Standard & Poor’s in Frankfurt, said the selected AGCS figures presented as part of the Allianz group results showed that the corporate division is ‘pretty strong’ in terms of underwriting performance. “On the combined ratio side they have shown decent results. I think 2010 was another year of good results,” he said. AGCS AG, AGCS France and AGCS NA all have AA rating from S&P. “What we do expect in our ratings on AGCS is that the underwriting performance that they are currently showing may not be sustainable,” Mr Bender noted. “I think we see pressure on tariffs in different lines of business and also in different geographic regions.” On the decline in AGCS’ operating profits, Mr Bender noted that the 2009 results benefited from a 10-percentage point reserve release. It was a positive one-off in terms of releasing reserves, he said, noting that both 2010 and 2009 were ‘good’ years for the insurer. From a capitalisation standpoint, AGCS is in a strong position, Mr Bender said. “We think that the standalone capitalisation of the AGCS operations to some extent reflects that there might be some more volatility in the AGCS results and, therefore, the capital levels are well commensurate with our rating expectation.” As a group, Allianz reported last week an operating profit of €8.2bn in 2010, the third best result in the company's history. This came as the insurer’s P&C business faced a near tripling in claims to €1.3bn due to hailstorms and wildfires in Australia and New Zealand, the earthquake in Chile and storms in Europe. The group P&C combined ratio improved to 97.2%, from 97.4, due to a strong recovery in credit insurance and improved combined ratios in France, Italy and other markets, the company said. As for the outlook for AGCS, Mr Theis said the company had finished establishing its presence in Belgium, Hong Kong, Japan, The Netherlands, Singapore, South Africa and Spain in 2010. “Its global expansion is complete, so 2011 will see the further integration of those and all AGCS offices worldwide,” he said. “In 2010, we doubled the share of the Asia-Pacific region in our book to 6% and will grow there more in 2011.” Also last year, AGCS firmly established a presence in Brazil, writing business in several areas, especially infrastructure construction projects such as new football stadiums for the 2014 World Cup. Mr Theis said AGCS wants to continue to grow in that region and the rest of Latin America.

AGCS hit by cat losses and soft market but delivers robust results

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